Hunton Insurance Recovery Blog

The Los Angeles Superior Court recently gave the production companies that produced the Netflix series “House of Cards” their “maybe” by allowing the plaintiffs’ coverage suit against Firemans Fund Insurance Company to proceed. The court held that allegations in the third amended complaint facially satisfied the policy’s insuring agreement by alleging that House of Cards’ lead actor, Kevin Spacey, was “necessarily prevented” from continuing or completing his duties under his contract and that his sickness was the direct and sole cause of the plaintiffs’ claimed loss. The court dismissed the plaintiffs’ bad faith claim, effectively ending the plaintiffs’ campaign to recover punitive damages.

No policyholder wants to hear the word “rescission” in the context of an insurance claim. The reality, however, is that when policyholders complete applications for insurance, they are typically focused on obtaining the best policy terms for the best rate. Nuances about question wording, the breadth of the applicant’s representations or how a court may analyze the insurer’s questions or the policyholder’s answers usually take a back seat to the central importance of placing and renewing coverage at a realistic price. But once a claim is made, insurers look back at applications to assess the accuracy and completeness of all information received during the underwriting process, especially in signed applications. If the insurer discovers a misrepresentation, it can be used to rescind the policy, leaving the insured with no coverage. 

When obtaining insurance coverage, businesses must be wary of policy exclusions that are so broad that they defeat the policy’s primary purpose and render coverage illusory. In Travelers Property Casualty Company of America v. H.E. Sutton Forwarding Co., LLC, No. 2:21-CV-719-JES-KCD, 2023 WL 5486746 (M.D. Fla. Aug. 24, 2023), the U.S. District Court for the Middle District of Florida considered this very issue in deciding when a policy exclusion goes too far.

On August 21, 2023, Southern California was hit by its first tropical storm since 1997.  The remnants of Hurricane Hilary brought record-breaking rainfall and knocked out power for thousands of Californians. This storm follows devastating wildfires in Maui, which killed over 110 people, and hot tub temperatures off the coast of Florida: the ocean reached 101 degrees (it should be just 74-88 degrees). The ocean’s record temperatures may strengthen the severity and prolong the season of this year’s hurricanes, which already plague Florida. According to an Accuweather meteorologist, the warm weathers are “just inviting a big system to hit the state again this year.” His prediction may prove true: Tropical Storm Idalia, expected to strengthen into a major hurricane, is scheduled to hit Tampa on Wednesday.

In a COVID-19 insurance coverage lawsuit that Hilton Worldwide Holdings, Inc. filed against several insurers in Nevada state court, two recent rulings in favor of Hilton highlight the importance of strategic decisions early in a case. 

Hurricane Ian is rapidly approaching the west coast of Florida and is expected to make landfall as a Category 4 hurricane near the Tampa area within the coming days. While the exact track is still being determined, there is a chance the storm may also impact insureds in Georgia and South Carolina. Now is the time to activate your disaster plan and ensure that you have your relevant insurance policies in your possession and that you review them for critical deadlines. 

We put together an alert here with tips to help you and your business mitigate potential storm loss and maximize coverage.

The ...

Harvard College and Zurich American Insurance Company have been embroiled in an insurance coverage dispute for over a year regarding Zurich’s obligation to cover Harvard’s hefty defense bills incurred defending its affirmative action admissions policy, which is presently before the U.S. Supreme Court. Last week, the world-renowned university told a District of Massachusetts court that it should deny Zurich’s motion for summary judgment because questions of fact remain unresolved. Harvard also accused Zurich of inappropriate discovery gamesmanship by withholding documents and information. 

In what is an unfortunate sign of the times, Springpoint Senior Living, Inc. recently sued its insurers in New Jersey federal court claiming they abruptly stopped covering Springpoint’s defense costs after doing so for nearly a decade.  A copy of the complaint can be found here. Springpoint’s allegations are emblematic of a growing trend among insurers taking drastic measures to avoid coverage, which is no doubt in response to the tightening economic conditions and looming recession around the globe. 

Another state court has issued a ruling favoring insurance policyholders in a COVID-19 business interruption dispute. This decision further confirms the trend of state courts recognizing the potential for coverage where many federal courts have not.

As previously reported on the Hunton Employment & Labor Perspectives Blog, workers’ compensation provides the exclusive remedy for injuries and illness that employees suffer arising out of and within the course of their employment.   Workers’ compensation provides the exclusive remedy for injuries and illness that employees suffer arising out of and within the course of their employment.  In the early stages of this pandemic, work-related travel to high impact countries or work-related exposure in a case that was being tracked by public health authorities provided support for work-related exposure.  In healthcare settings, work-related exposure will likely be established when exposure to infected patients occurs.  But in other settings and as the diseases spreads in the United States, the analysis about whether an illness is covered by workers’ compensation will be more difficult.

In an important decision for policyholders, a New York state appellate court rejected AIG’s effort to avoid defending McGraw-Hill in a series of copyright suits.  In doing so, it reversed the trial court and rejected the insurer’s attempted use of the contract exclusion and fortuity doctrine as a bar to coverage under various multimedia liability insurance policies.

Insurance companies frequently raise the so-called “dishonesty” exclusion that is typically found in most professional liability and directors and officers insurance policies.  Last week, the U.S. Court of Appeals for the Sixth Circuit took a substantial step toward curtailing that practice.  In a coverage dispute with eight-figure implications, the appellate court found in favor of the policyholder and ruled that publishing false statements does not equate to dishonesty and thus is not sufficient to support application of a dishonesty exclusion.

Policyholders facing any type of products liability scored a win in a recent decision from the District Court for the Northern District of Illinois.  The court found that an insurance company must defend its insured against claims arising out of a recall while simultaneously funding the insured’s affirmative claims for recovery.

Puerto Rico’s dire insurance situation more than a year after Hurricane Maria remains a constant reminder of why policyholders must diligently pursue their property and business interruption claims in the immediate aftermath of a storm.  The numbers are staggering.  On an island the approximate size of Connecticut, Hurricane Maria caused an estimated $100 billion in damage.  According to the Office of the Insurance Commissioner of Puerto Rico, the hurricane resulted in more than 287,000 insurance claims.  Roughly 11,000 of those claims, representing an estimated $2 billion in losses, remain unresolved.

The Supreme Court of California has ruled that a general liability insurer must defend an employer against allegations of employee misconduct, reinforcing the breadth of (1) what constitutes an “occurrence” under an employer’s commercial general liability (CGL) policy and (2) the duty to defend regarding claims for negligent hiring, retention and supervision. The opinion in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co., Inc. can be found here.